Deluxe posts a loss but cost-cuts spur rally

NickGodt

NEW YORK (MarketWatch) -- Shares of Deluxe Corp. were up as much as 14% on Thursday after it posted a quarterly loss and slashed its dividend, but announced a plan to cut costs by $150 million by the end of 2008.

Shares of St-Paul, Minn.-based Deluxe
DLX, +0.33%
were last up $1.88 to $15.61.

The company, which provides personalized printed products such as checks to small businesses, financial institutions, and consumers, posted a second-quarter loss of $2 million, or 5 cents a share, compared with earnings of $42 million, or 83 cents, the year earlier. The drop was attributed to a previously announced $45 million, or 57 cents a share, charge related to Deluxe's abandonment of a software project.

Analysts surveyed by Thomson First Call were on average expecting a loss of 9 cents a share.

Revenue fell to $403 million from $434 million.

"We are disappointed with our second quarter results, and more specifically, having to take an impairment charge," said Lee Schram, Deluxe's chief executive, in the earnings statement. He said the company would now focus on its strengths, including its brands, customer relationships, and printing capabilities.

These include plans to streamline its call center and check fulfillment activities and eliminate redundancies in its system. The company also said "significant cost opportunities" exist in its manufacturing, supply chain, and other shared services functions.

Deluxe also said it expects 2006 third quarter revenue to range from $395 million to $405 million and earnings per share to range from 41 cents to 45 cents. For the year, revenue is expected to be between $1.63 billion and $1.65 billion, and earnings per share are expected to come in between $1.41 and $1.51.

The average forecast of analyst polled by Thomson First Call is for full-year earnings of $1.46 on revenue of $1.60 billion.

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